Personal loan: the things you should know
When you are looking for a new way to financing, you might want to consider a personal loan instead of a credit card. Personal loan can be an inexpensive way to consolidate debts, cover an emergency or to build some credit. The reason these loans are popular among consumers is that loan terms and rates are low, the application process is relatively quick and easy and the borrower doesn’t have to put anything in pledge.
The absence of collateral makes the personal loan less risky for the consumer and a greater risk for the lender. Because of this, lenders usually charge higher interest rates on personal loans than on mortgage or car loans, but lower interest rates than on credit cards.
The biggest determining factor in whether you qualify for a personal loan and what the interest rate will be is your credit history. Financial institutions look at the customer’s credit score and credit history to make lending decisions. So, the better your credit is, the better your interest rate will be and more options will be available to you. If your credit is bad, you may pay a higher rate to get approved for the loan.
The interest rates and terms on personal loans are fixed, and this is why consumers like personal loans. The interest rate won’t go high unpredictably and won’t vary. The terms are transparent and monthly payments do not grow like snowball. The set terms and payments are predictable and disciplined; you won’t get this with a credit card.
Since personal loans are not secured, they are not always easy to get. Lenders look at applicants with a critical eye but if you are prepared, you can get approved on good terms.
Here are some tips to increase your chances of getting approved for a personal loan:
- Before you go to your bank, check offers online. Online banks and lending sites can offer loans on terms which are better than your bank might have. For example, at BestCreditOffers.com you can use card match tool to see personal loan offers.
- Decide what loan you need, terms you can afford and for how long you want to take a loan.
- Check your credit reports and credit scores. You need to know your credit before you start looking for a loan. You can even correct potential errors on your credit reports before the bank pulls your report.
A personal loan can be a good option when you need quick cash or when you are trying to pay off your debts. But you should remember that it is still a debt and you should be committed to paying it off and not racking up more debt. Think carefully and make calculations to plan your payoffs. Be disciplined and you will reach your goals.